Saving Money: Teaching Kids Money Management

Money management is an important life skill, but credit cards and online billing can make teaching kids to save money a bit of a creative challenge. My introduction to money management came from helping my grandpa sell corn from the back of his pick-up truck on the highway in front of our house. Customers always paid by cash, which my mom then took to the bank. I loved watching it travel through the pneumatic tubes to the teller! My oldest sister saved up dollars in an old jar, which she then used to buy violins as she outgrew each size. Even after we left farming life behind to travel the world, I had a lot of exposure to money since most of the countries we lived in wouldn’t accept foreign credit cards – or issue local credit cards (or even bank accounts) to people who were only living there for a few years. So my mom paid for groceries in cash – both at the open-air markets of Central and South America and in the grocery stores of Europe.

For my kids, the process is much less transparent. I only pay with cash when credit cards aren’t an option, and all of our bills are paid online. Mike’s pay check is electronic, so the only time my kids see checks is when I scan the occasional blog campaign check into my bank account with my phone. Here are a few ways we are teaching our kids money management in a world of credit cards and online banking:

Teaching Kids Money Management

Include them in family budget discussions

The online and plastic money world that we live in makes family budget discussions more important than ever! We don’t talk dollars and cents with our kids – they are still struggling with the difference between $100 and $1,000 – but they like to look at the pie chart in Quicken that breaks down our spending, as well as the bar graph showing the differences between what we earn and what we spend each month. You don’t need to crunch numbers to get kids thinking about prioritizing spending, or to help them learn that it’s important to spend less than you earn so that some is set aside for emergencies.

Have them earn their “wants”

I think it’s great to give kids gifts, but I also believe that kids can both learn and gain a lot of satisfaction from earning things that they want. We don’t currently give our kids currency allowances, but they have various ways in which they can earn tickets, which they then exchange for privileges or items that they want. Some items they can earn easily; others take a long time. My son has spent months earning a LEGO set that he really wants. I love seeing his dedication, and I know that he will truly value the set when he finishes earning it. Sometimes my kids will give some of their tickets to help a sibling earn something that they want, and I love that spirit of generosity and cooperation. The chart below is one my four-year-old just started working on (also for a LEGO set, but a smaller one). I usually have my kids propose how hard they have to work to earn something, and I find that most of the time they offer as much or more work than I would suggest.

Be honest when something is too expensive

My parents were always very honest when something was too expensive – and I consider it one of the most important lessons I learned! Because they knew how to walk away from something they wanted because it cost too much, I learned to do the same. Sometimes they walked away because they literally did not have enough money for the item or experience; other times they walked away because they chose to spend their money in other ways that they considered more valuable. Kids will learn this lesson best if you can explain why the object is too expensive. Maybe you bought something else instead recently, or you are saving up for a family vacation, educational experience, or because you want to give to a charitable organization or buy something for someone else. Maybe the item costs more than you family makes. We have had a lot of conversations with our kids recently about why we moved from a perfectly nice house with a huge yard in Massachusetts with a swing set into a condo in California – and they really appreciate our taking the time to explain the situation.

Teach them how you earn money

This is one area where blogging has actually helped! My kids know that Mike goes to an office to work, but they see me write sponsored posts, and watching the process of photographing a tutorial and writing up steps has helped them learn to appreciate the effort that goes into earning the income. They have also seen me earn money by teaching piano lessons in our home, and through photography gigs.

Once kids are exposed to the adult money earning, saving, and spending world, they will practice on their own through pretend play. My kids have been making a lot of LEGO shops, lately, and I remember creating fairly complex money games as a kid. One of my brothers even ran a bank that charged interest!

Let them see how you save money

Give your kids opportunities to see you saving money! Maybe you clip coupons for the store or write a grocery list and stick to it to avoid impulse purchases. I think it is also very healthy for kids to hear about parents giving up things they would like to save money – either to meet needs or to save up for other wants.

Reader Interactions

Comments

Great tips! It’s hard to teach littles about money, especially in the Bay Area where everything is inflated. We do a privilege chart instead of allowance right now. J appreciates knowing what he can do to earn a certain privilege (like watching a show on Netflix)

Thank you MaryAnne ! Wonderful tips and I totally agree with u about paying our bills and using credit card most of the times, making it difficult to teach kids abt money .The only time we give or talk abt money with our son is the play area rides . They need coins to ride, so we decide a budget for him , like 3 rides. That’s when he counts how many coins he needs. Earning for a toy is what we have not tried yet but looking forward.

The book discussion group our family takes part in recently read about the “envelope technique” for teaching kids money management, and I am very excited to start trying it out, probably when Nikki turns 8. Basically the parents take from their budget a weekly, monthly, or even annual amount that they would spend for each child’s clothing and give it to the child (we’ll start with our oldest and give the responsibility to each child as they get to that age). Then the child is responsible for buying his or her own clothing with that money. When the money’s gone, it’s gone, unless the child earns more somehow. The system can be expanded into spending money, fuel for the car/bus fare, etc, as the child grows.

We just recently started an allowance and the kids are also required to give and save from their allowance. It’s been really interesting to see the kids work to save and get extra money for things they want. Princess claims to want more money, but then doesn’t actually go through with the work.
On the other hand the boys are constantly asking about more jobs, usually trying to find the quickest and easiest job to do.

We do a little homeschool reward store that teaches saving and also the concept of 1’s, 10’s and 100’s.
We buy very little for our kiddos. They save their own money and make purchases for toys. We try to guide them to good decisions.
Like you we also discuss if things “cost too much.” We also discuss how our family makes choices to have “less” material things than some others so that we have money to help others like our children in Cambodia.

Teaching kids about personal finance is a gift that keeps on giving. They need to learn these skills like saving money and what credit is in order not to get into trouble as college students and/or adults.

You did a great job for this campaign, MaryAnne. I really enjoyed reading your post. Our 7 year old has her allowance, but my husband and I couldn’t agree so far on the subject of earning additional money and/or tokens, since he is worried about her working for rewards instead of intrinsic motivation or duty. I wonder how you are addressing this dilemma in your house?

I feel like rewards can be a stepping stone towards learning intrinsic motivation and duty. I use rewards to teach my kids to work hard, with the idea that they will then learn how to apply the ability to work hard to things they care about. So far it seems to be working.

I know there is a lot of research right now downplaying rewards, but I have yet to meet a rewards researcher who is willing to give up their salary (or cut it to just enough to meet their basic needs). I’ll cut rewards completely when I see someone take that step. :)

Great post, MaryAnne! I realized the impact of living in an electronic world when we started talking to our kids about tithing. They had never seen us do it because we did it online. Such an eye opener to be more deliberate in talking about money.

I have a subscription to All You so I don’t miss an issue. It is a great source of money-saving tips and I love the coupons and crafts, too. I’ll tell you a secret…I have 2 subs one to cut up the coupons and one to read and save the articles!